Nowadays, the increasing population in urban areas is forcing government agencies, builders, and investors to focus on building real estate housing. However, the affordability of these housing is becoming a concern. This research examines the affordability of residential real estate housing in Bahir Dar City to the residents. The study utilized a household income survey; conducts real estate market assessment; explores city housing policy and land tenure system; values financial accessibility; investigates the housing demand; compares and contrasts the experience of international housing policy and land tenure system with the local system. The study developed a conceptual housing policy framework to address the housing affordability challenge. Four common internationally accepted approaches were used to measure the affordability of real estate housing. Based on the study a median household has 4,500 Birr monthly income. Results showed that only 20% of residents have their housing unit, while the majority are living on rent and/or other means. The price of a prevailing standard real estate housing unit is approximately 2,200,000 Birr. Presently, only 14% of real estate is owned by residents from more than 600 real estate houses sold in the city. The findings of this study call that the real estate houses developed and sold through the formal market are generally not affordable for the vast majority of the residents. Because the income of residents is too low and factors affecting housing cost and access are too expensive. Banks should have a special financial system for affordable housing. The government should revise the housing policy and land tenure system